Monday, December 19, 2005

Blue-Collar Workers Turn Backs on UAW

An interesting article in today's Detroit News points out an instance, in Michigan, where factory workers are actively fighting unionization:

It speaks to a growing skepticism and sometimes outright distain of a union that historically inspired unflinching loyalty from members and fear from management.

Does this really surprise anyone? Just what, exactly, does the UAW do for its workers these days? The UAW got themselves into labor contracts which were inherently unsustainable, now the Detroit big three find themselves in a situation where they simply must move production overseas to compete.

Somehow Toyota is doing just fine with its factories in the US - but the UAW is actively hindering the big three's ability to compete. The UAW, along with most of the legacy unions, is rapidly becoming obsolete. The sooner they disappear, the sooner Michigan's economy can become competitive again.

Monday, November 14, 2005

Black October

There's an excellent article on today's Detroit News web site regarding the effect of Delphi's Bankruptcy on the automotive industry and unions. One quote:

"The domestic auto industry's structure is not stable... And, simply put, we expect it will get worse before it gets better."

We're seeing the beginning of a dramatic restructuring of the US automotive industry, and by extension, the legacy manufacturing sector. As GM, Ford, and Chrysler are experiencing record amounts of idle time at factories, Toyota is scrambling to open more US plants.

Michigan is going to bear the brunt of the negative effects of this change, and we'd better be willing to face the realities of the situation. Michigan must be made attractive to business investment if we are to get through this.

Friday, November 4, 2005

Grand Rapids Public Schools - Holy Cow

In the spirit of yesterday's post on the Grand Rapids school board's inability to make a decision on selling a building, we give you today's installment, "Bleke admits mix-ups on Huff." There's not much that can be said about this one, so we'll just ask you to read the article from the Grand Rapids Press. It speaks for itself:

Bleke admits mix-ups on Huff

Thursday, November 3, 2005

Grand Rapids Public Schools Paralysis

It's funny to watch the Grand Rapids school board completely bungle everything they do. One has a hard time understanding exactly how they can bat 1000 when it comes to messing up the simplest task.

The GRPS board is considering selling the now-unused Huff elementary school on the city's north side. They got two bids - first from a charter school company offering $1.3 million. The second bid is from a non-profit organization run by Dave Allen, one of the board members (and a former president of the board), offering about $800k.

The board had an "emergency" meeting last night to consider the charter school company's bid. The board realized that it doesn't look so good to sell a school to a board member (can anyone say conflict of interest?). Allen's organization proposed selling off a portion of the land as "brownfield" sites so that the school district could capture additional tax dollars. One hitch - no one ran the idea by the city first.

To top it off, Allen's organization wouldn't even be able to raise the money for months. There was such an outcry at the unusual Wednesday evening meeting, that the board decided to table to decision.

They can't even handle the sale of an unused building - how can we expect them to handle the education of 20,000+ kids?

Wednesday, November 2, 2005

Michigan Ouch

Over the last month we've seen several events which will permanently shift the economic reality of Michigan.

1) Northwest Airline's mechanics strike, which flopped and ended up in a busted union, had no consequence for NWA. This marks a major turning point for unions in Michigan - they have lost the organizational power and they don't have the sympathy of the average Joe.

2) Delphi's Bankruptcy. This will have some very far-reaching effects, and it is already starting to ripple. Not only is it likely that thousands more manufacturing jobs will be lost here in Michigan (including some in the Grand Rapids area), the Unions are suddenly on their heels. Nearly immediately after the Delphi Bankruptcy filing, GM and the United Auto Workers worked out an agreement to shave billions off GM's health care bill.

3) Today, the Detroit News reported that October car sales dropped to a seven year low. Total Big Three US market share dropped from 57% in October of 2004, to 52.4% in October of 2005. In the mean time, Toyota captured 15.1% of the market, the highest ever for that company. This will continue to have far-reaching effects on the Big Three (Ford and GM in particular) and will put further pressure on those companies to achieve higher cost savings, in turn putting pressure on the UAW for more concessions.

Things aren't looking good. What can be done to help? Michigan must aggressively become a business-friendly state to attract non-manufacturing jobs. How do we do that?

1) Eliminate the single business tax - the most onerous business tax in the nation.

2) Lift the cap on charter schools - our traditional public school systems are collapsing under their own bureaucratic weight. A market in education will fix this problem. Competition will improve achievement for all students.

3) Pass a "right to work" law which allows employees to decide whether or not to join a union when they take a job at a union shop.

Those are just first steps. Hopefully we can stand up to special interests in order to improve the economic situation for all Michiganders - but we're not holding our GR Pundit breath.

Thursday, September 22, 2005

Adopt-a-Bathroom? How About Adopt an Everything?

An interesting idea was posited by an offer by a citizen to pay to keep the bathrooms open at Aberdeen Park so the Creston High School Girls tennis team wouldn't have to go to Burger King to use the bathroom. The City refused the offer.

This brings up a good idea. How about all parks, pools, and the zoo go private and not for profit? Each park could be adopted by a company or neighborhood and the cost would suddenly be off the rolls for the taxpayers of the city. There are examples of private parks all over the world. Some are free to users, some charge a small fee, but most are better run than government-owned and operated parks.

Why would the city refuse the offer to pay for some park operations? Because bureaucrats have no incentive to do well. Let private groups run the parks and they'll do what it takes to keep people coming back.

Tuesday, September 20, 2005

Favorable Job Market Predicted for Grand Rapids

MiBiz reports that the job market for the Grand Rapids area is looking up for the fourth quarter of 2005.

The trend is continuing in favor of service industries. The construction, wholesale/retail trade and finance/insurance/real estate industries are expected to add the most jobs, with manufacturing staying stable with no growth anticipated.

But we'll remind our readers that Governor Granholm wants to tax service industries more in favor of tax cuts for manufacturers. It doesn't make much sense to increase the tax burden of those industries which are creating jobs, which will result in the creation of fewer jobs. The single business tax needs to be cut across the board, so all industries benefit. The lower the taxes, the more money employers will have to create jobs. It really is that simple.

Michigan has the nation's worst economy and people are leaving the state. It's time to get government out of the way so businesses can be allowed to create jobs.

Monday, September 19, 2005

GRPS Loses More Students

The Grand Rapids Press reported today that the Grand Rapids Public Schools lost 1,100 students over last school year. They say this is the largest single-year student loss in a decade. The article (which is not available online) quotes a school board member who's completely baffled by the loss.

Well, gee, who knows, maybe it's the total lack of fiscal discipline? After asking for and getting $160 million to build buildings, they increasingly hint that they will be declaring bankruptcy. Now please tell us, board members, who in their right mind would send their child to a school district that will be bankrupt in a year? The only students that will be left are those with parents who can't afford to send their children someplace else.

So, while tens of thousands of children get completely short changed with a disaster of a school system, the politicians in Lansing, in collusion with the teacher's unions, do everything they can to prevent the expansion of charter schools, which serve a much higher proportion of at risk and poor children than traditional public schools. And when's the last time you heard a charter school whining about money?

It's a tragedy that an entire generation of children, whose biggest hope in life is to get a good education, will be left behind by bureaucrats, labor unions, and selfish politicians.

Monday, September 5, 2005

Labor Day Cancelled

In what can only be described as a delicious irony, the labor day parade was cancelled in Grand Rapids.

Local unions, which have the responsibility of financing the cost of putting on the parade, simply didn't have the money this year. They couldn't come up with the necessary $25,000. Union leaders, however, promise to be back with a parade next year at a trimmed-down $10,000 cost.

According to Wikipedia, Labor Day started in the 1880's, by organizations such as the Knights of Labor and the International Workingmen's Association (which was led by Karl Marx himself).

We here are GRPundit don't mourn the loss of the labor day parade.

Tuesday, August 30, 2005

Union Shafts Workers

In reading about the striking workers from Northwest Airlines, one can't help but feel sorry for them. Northwest is operating smoothly after replacing them, their health insurance runs out tomorrow, and they get their last paycheck on Friday.

Here are GR Pundit, we're often hard on unions, but it's important that our readers understand that we're hard on union leadership, not union members. The airline mechanics' union had the opportunity to make concessions to keep the jobs of most of the union members, but those concessions were rejected. Intead, over 4,000 mechanics are now out of work with no income.

Today's unions are losing their clout and their muscle. The airline mechanics' union is just one example of many to come where the members are going to be out of a job in the name of solidarity.

Now there are 1,200 replacement mechanincs working at Northwest who, we're sure, are happy to have a job. In the mean time, the head of the mechanics' union makes statements which are clearly untrue:

AMFA co-founder and national director O.V. Delle-Femine visited picketers Monday at Detroit Metro Airport to boost spirits.

"In a couple weeks, people are going to see the failure of this airline," Delle-Femine told strikers gathering at a nearby United Auto Workers union hall before heading to picket lines.

He's lying to his members to try and keep them in line. In the mean time, we're sure Mr. Delle-Femine is receiving his full salary and health benefits.

Wednesday, August 24, 2005

Fork in the Road for Unions

The Detroit News had a good selection of articles yesterday on the crisis faced by unions in today's America. The current Northwest Airlines strike is highlighting the fact that the ability of unions to flex muscle and take on "big business" is severely weakened. Northwest trained replacement mechanics for 18 months prior to last week's strike. An article from today's DetNews says that the strikers' chances of forcing the airline into an agreement are slim.

Northwest says that 96% of flights were successfully completed on Tuesday, up from 91% on Saturday. The strike caused a momentary disruption, but things are back to normal. Looks like the strike was just a blip on the radar.

An important quote from the article:

In interviews this week, the replacement hires say they don't regret their move, despite being derided as "scabs" and "scum" by the strikers, who yell at them from sidewalks above the tarmac.

The Northwest jobs are a chance for better pay and, for many laid off from other airlines, a chance to return to the industry.

That sums the situation up well. While the union members strike, people who are happy just to have a job are filling in. The poor state of the economy in Michigan makes it unwise to walk off the job.

Particularly interesting about the Detroit News' web site is that a poll of online readers shows that 67% believe that union demands are out of line. Read the comments as well, they are mostly anti-union.

While unions had an important role to play in the past, they have outlived their usefulness and now just stand in the way of economic progress. The legacy air carriers and automakers, weighted down with the union mentality of the 1950s, are the big losers in today's economy. As companies such as Northwest aggressively challenge unions, the unions will become less and less relevant.

Friday, August 19, 2005

Area Teachers Best Paid in the Nation

In an interesting article from the Grand Rapids Press, it seems as though area teachers are the best paid in the nation, when cost of living is taken into account.

The average teacher in the GR area makes $55,568 in adjusted salary. Bert Bleke, superintendent of Grand Rapids Public Schools, says that this number looks "about right."

Of course, the teacher's union is going crazy now that the secret is out. "We're befuddled," according to the GREA's president.

We here at GR Pundit are befuddled too. The GR area has the highest paid teachers in the nation (with Grand Rapids Schools teachers not being very far behind), and the GR School district is hinting at bankruptcy. Befuddling doesn't begin to describe the situation.

Monday, August 15, 2005

Grand Rapids Schools Collapsing

There was a good article in today's Grand Rapids Press regarding much of the top leadership of the Grand Rapids Public Schools district leaving. Bert Bleke, the superintendent, is leaving only four years into his five year contract, the Deupty Superintendent has left, the Chief Academic Officer is leaving in a few months, the Chief Operations Officer is leaving, as well as two of the five high school principals (one of them leaving for a charter school), as well as a number of elementary school principals.

Hmm... maybe they see the writing on the wall?

The school district, which spends over $10,000 per student, claims that it is near bankruptcy. At this point, that's about the best thing that could happen. If a federal trustee takes over, he could rip up the contracts and start over. All the union contracts should be tossed, along with most of the administration. They maybe, just maybe, some reform could be implemented. But we're not holding our breath.

With folks like Mayor Heartwell in the likely position to influence what happens to the district, there really is no hope. He'll probably propose a group hug to make things all better.

Wednesday, August 3, 2005

Election Wrap-Up

The City's municipal election had some interesting results on Tuesday:

1. The first ward (west side of Grand Rapids) saw incumbent Jim Jendrasiak get less than the 50% required to avoid a runoff election in November. We're a bit surprised by that fact, since incumbents usually don't have a hard time getting past primaries.

Allegations that Jendrasiak wanted to cut the housing inspection department's budget after he was cited for several violations at his own home hang over his head, however. Jendrasiak will face newcomer Dave Shaffer.

Jendrasiak got 44% of the vote and Shaffer got 25%

2. The second ward (north and northeast side of the city) saw a hotly contested race with Rossalynn Bliss getting 43% of the vote and Shaula Johnston getting 33%. Bliss, who's lived in the second ward for only three years, was also getting grief for never having voted in a city election.

3. The third ward (south and southeast sides) saw incumbent Jim White win 58% of the vote, re-electing him without a runoff.

Wednesday, June 29, 2005

Michigan Minimum Wage Zealots

As GR Pundit readers should already know, there is a campaign in Michigan to get a proposal on the ballot to increase the state's minimum wage to $7.15 an hour. We've already pointed out how increasing the minimum wage increases unemployment, but we've come across an amusing fact about the folks who are pushing this ballot proposal.

An organization called the Association of Community Organizations for Reform Now (ACORN) is one of the prime backers of the proposal. ACORN is essentially a bunch of ill-informed socialists who campaign for living-wage and increased minimum wage laws, in addition to a whole host of other collectivist campaigns such as universal health care, "affordable housing," social[ist] security "protection," etc.

However, the funny part is that when ACORN was confronted with having to pay a "living-wage" in California, they sued the state, seeking an exemption. In ACORN's legal brief, they claim:

"The more that ACORN must pay each individual outreach worker—either because of minimum wage or overtime requirements—the fewer outreach workers it will be able to hire."

Well, that summs it up perfectly, doesn't it? Need we say more?

Oh, by the way, unemployment rates increased in 14 of Michigan's 17 major labor market areas in May. The Grand Rapids area's unemployment rate went from 5.7% in April to 6.3% in May.

Tuesday, June 28, 2005

Banning Wine Shipments?

The legislative busybodies are at it again. A committee in the State House voted to ban all in-state and out-of-state shipments of wine. Basically, they want to make it illegal to mail wine to anyone from anywhere in or out of Michigan.

This is in response to a US Supreme Court ruling that decided that it is illegal for states to ban out-of-state wine shipments while allowing in-state wine shipments. So, what does the legislature appear to want to do? Ban all shipments across the board.

One quote from the above-linked article made us chuckle:

Rep. Chris Ward, R-Brighton, said he introduced the bill because he is worried about teenagers being able to easily buy wine on the Internet without such a ban.

Give us a break. If kids want wine, you'd better believe that there are easier ways than ordering it online. Heck, that takes a lot of time to do. It would probably take the average teenager about an hour to find a friend or a friend of a friend to buy locally.

Of course, as the state expands its reach to protect us from ourselves, real people's jobs will be affected.

"It will literally kill our business," said Ed Gerten of Pentamere Winery in Tecumseh. "What we're looking for is a fair and equitable solution, but this bill is not. This bill will crush us."

As the legislature looks to fix a problem that no one has any evidence exists, they will kill another industry in Michigan and put more people out of work. Brilliant.

Monday, June 27, 2005

Limiting Growth of Government

Michigan Senator Nancy Cassis has introduced a bill to amend the state's constitution to limit the growth of state government. While there is already a constitutional provision (known as the Headlee amendment) limiting the amount of revenue the state may take in, this bill would limit the state's spending growth. The bill, called Senate Joint Resolution D, limits annual total state spending growth to the previous year's spending, plus the inflation rate, plus the state population growth rate.

This bill takes the previous year's spending and starts from there for the following year's spending limit. For instance, if the state spent $30 billion in 2002 and $29 billion in 2003, the state can increase spending a maximum of the inflation rate over the 2003 spending level rather than increasing from the highest previous point. If the inflation rate was 3%, then 2004 spending would be limited to approx $29.8 billion.

We think this is an outstanding idea. It would force constraint upon the politicians and limit government. Of course, many of the politicians will whine and complain that they won't be able to spend like crazy when the economy is good, but that's the point.

Michigan is a high tax state and jobs are fleeing like there's no tomorrow. Jobs are going to states that have low taxes and a better labor environment. This bill would address the state's insatiable appetite for taxes and begin to address the business environment problem.

Thursday, June 16, 2005

State Unemployment Rate Rises Again

Michigan's unemployment rate rose again in May, to 7.1%. In the mean time, the national unemployment rate continues to decline. It stands at 5.1%.

And the legislature and governor continue to argue over how much more money the state should borrow to "invest" in creating jobs. It's akin to trying to borrow money to invest in the stock market. No financial expert would ever suggest doing so, but our politicians need to look like they're doing something. Past government attempts at picking the economic winners and loser have failed, and they will again.

It comes down to this. Michigan is a high tax state that makes it tough for business to grow. The state single business tax is the most onerous tax in the nation. It taxes businesses even if they don't make a profit. Heck, it even taxes companies when they pay for health care for their workers.

If the governor and legislature were serious about brining business to Michigan, they would do a few things:

  • Eliminate the single business tax
  • Eliminate the cap on charter schools to inject competition in education
  • Reduce state government red tape

    The state house passed next year's budget with no increase in spending and no increases in taxes. Of course, this is sending the governor into a tizzy, who wants to increase taxes on liquor, vending machines, and doctors. Apparently she doesn't get it. Increased taxes kill jobs.

    That Which is Seen and that Which is Not Seen.
  • Sunday, May 1, 2005

    Local Businesses Speak Out in Favor of Casino

    An interesting article in today's Grand Rapids Press says that there are several local businesses that are bucking the "official" line of the Grand Rapids Chamber of Commerce.

    The Commerce folks oppose the casino in Wayland because they think it will sap business from Grand Rapids. Nevermind the fact that there are already people who drive all the way to Mt. Pleasant currently. Keeping those folks closer to GR apparently doesn't enter into their minds.

    But the important thing to note in this article is that there are some business owners in town that are afraid to speak out in favor of the casino out of fear of repercussions. Unbelieveable.

    Monday, April 25, 2005

    Granholm Complaining

    Governor Granholm is complaining that her "Jobs Today" and "Jobs Tomorrow" plans aren't sailing through the legislature, as she'd like them to.

    Gee, let's think about that. Her plan is to lower the Single Business Tax for the industries that are fleeing Michigan such as manufacturers. So far so good. Ah, but she wants it to be revenue neutral. Therefore the tax is also raised on the industries in Michigan that are actually creating jobs, such as the insurance and financial services industries. Wow, great idea. Tax the growth industries in Michigan more.

    In addition, her plan to sell bonds so that bureaucrats can invest the money in startup businesses isn't going so quick. Again, as though bureaucrats are better than the market at investing. She's trying to borrow the state into prosperity.

    And a third aspect is for the state to offer low or no interest loans to school districts so that they can build new buildings, again, with the hope that this will increase construction jobs. State borrowing to create jobs doesn't help the economy. It hurts in the long term.

    Our governor (and much of the legislature) need to go back to Economics 101. They should start by reading Frederic Bastiat's That Which is Seen and That Which is Not Seen.

    Friday, April 22, 2005

    Michigan’s Economy Ranks Dead Last

    A recent report issued jointly by the National Governor's Association and the National Conference of State Legislatures (hardly partisan hack groups) this month said that Michigan's economy ranks dead last in the nation.

    Some highlights are:

  • Personal income grew in Michigan by 3.29 percent between March 2003 and March 2004, placing Michigan second to last among the states. The national average was 5.15 percent.

  • Michigan was last among the states in employment growth between January 2004 and January 2005, showing a -0.3 percent decline, compared to a national average of 1.4 percent growth.

  • Michigan tied for 43rd in population growth between 2003 and 2004, registering 0.3 percent growth. The national average was 1 percent.

  • In the mean time, the governor and legislature continue to push useless "economic development" initiatives to give some businesses tax breaks (and tax increases to others). The Mackinac Center just released a report showing that the Michigan Economic Development Corporation has been completely ineffective over the last ten years at creating jobs.

    Time to face reality and fix Michigan's economy with real reforms:

  • Drastically reduce or eliminate the Single Business Tax

  • Make Michigan a Right to Work state, allowing workers to refuse to join a union if they don't want to be a member

  • Lift the cap on charter schools to create a dynamic market for education
  • Wednesday, April 20, 2005

    Casino Closer to Opening

    The federal government is in the process of approving the Gun Lake band of Pottawatomi Indians to open a "class 2" casino in the Wayland area. A class two casino can only host gaming such as bingo and a few other electronic games. Once that is opened, the tribe can pursue a class three license with the state to allow everything else you normally see in a casino.

    Of course, the powers that be are up in arms. A local group, mostly consisting of business folks in Grand Rapids, calling themselves "23 is Enough," referring to the 23 casinos in Michigan, is fighting the decision.

    But that very name is the picture of hubris. 23 is enough? Says who? Certainly not the marketplace. This type of rhetoric is coming from the business community. We've never seen them have a campaign against taxes, saying "40% is enough." Perhaps they should concern themselves less with a job-creating enterprise than with the job-killing enterprise of excessive taxation.

    We look forward to another local casino. The more the better.

    Tuesday, April 19, 2005

    GRPS Sticking to Its Guns

    Yesterday the Grand Rapids Public Schools board voted in favor of outsourcing all school bus services. The move is estimated to save $2 million per year for the school district and $18 million over five years. Hundreds of protestors showed up, according to the Press, to try and convince the board not to outsource.

    How can the district save so much by outsourcing? One reason is that the state's retirement pension system is extremely expensive for school districts to pay in to. In addition, school districts have no choice - all employees are covered by the pension system whether they want it or not. The pension system is very similar to Social Security in that it's another pay as you go system that will only get more expensive and unsustainable as time goes by. It's a "defined benefit" plan rather than a "defined contribution" plan. It's the same type of system that the legacy manufacturers of America are getting clobbered with, again, because of union demands.

    Second, the teacher's union runs its own health care plan, called MESSA, which is estimated to be 20% over market cost. What does the union do with that extra money? They apparently skim it into their own coffers.

    Basically, the school district can outsource those jobs to companies that will pay the bus drivers the same wage, but save millions on the extremely expensive benefits that the state and union mandate. These folks will still get benefits, just not benefits that subsidize the union.

    Unfortunately, these folks are the victims of their own union. They demanded more and more until the market simply couldn't sustain them any more. Now they have priced themselves so far ahead of what the average worker gets in terms of benefits, that the school district can save $2 million a year by outsourcing only 225 jobs. That's over $9,000 per yer, per job, that the school district will save. And that's just for part-time bus drivers.

    We applaud the board to sticking to its guns and ensuring the school district spends its money wisely. Hopefully they won't stop at just bussing.

    Tuesday, March 29, 2005

    Mayor in Panic Mode

    Grand Rapids mayor George Heartwell held a rally in the Creston neighborhood on Monday to continue his so-called "rebellion" against cuts in Community Development Block Grants.

    The mayor, along with all the big-government spenders are panicking lately because of reduced revenues to local and state government.

    But the real kicker is the mayor's quote regarding these cuts and his mission to extract more money from taxpayers, saying he won't stop, "until God's reign of justice permeates our world."

    We didn't realize that Community Development Block Grants were part of God's master plan. In fact, we have yet to see a section of the Bible that commands those in government to use the force and effect of government to extract money from people, at gunpoint if necessary, to redistribute to the poor. We always thought that the most virtue in giving was when one is giving from the heart, not when one is forced to do so under the threat of jail.

    Folks like the mayor, and other Great Society apologists, are going batty because they see their welfare state being dismantled. Nevermind they have nothing to show for it.

    Friday, March 25, 2005

    Time for Amtrak to Die

    President Bush proposed cutting 100% of the Amtrak subsidy. This is sending the public transit people into a tizzy. Though we all think trains are cool and it's fun to ride one, let's take a look at the numbers.

    Michigan subsidizes Amtrak operations to the tune of about $7.1 million per year. The experts estimate that the state would have to kick in an additional $25-$30 million to make up for the lack of a federal subsidy to keep things going.

    Michigan's three Amtrak routes carried 600,000 people last year.

    Let's do some math. A subsidy means that the government is making up for the difference between what Amtrak receives in revenue from tickets and what it actually costs to run the system.

    Let's combine the two subsidies and conservatively say that the total is about $32 million. 32 million divided by 600,000 passengers means that Amtrak is losing about $53 per passenger.

    That's right, they're losing $53 per passenger. How can anyone justify that?

    It's a wasteful system that eats up tax dollars that could be better spent... as a tax refund!

    Thursday, March 24, 2005

    Michigan Unemployment Rises (Again)

    Today we see that Michigan's unemployment rate again increased. February's rate is 7.5%, up from 7.1% in January.

    Meanwhile, the legislature and governor wrestle with a $400 million budget deficit for next year.

    The news just isn't getting any better for Michigan. What is to be done to help this state? It seems we're heading toward returning to the days of double-digit unemployment. That's not the Michigan I want to live in.

    And the news over the horizon is even worse. Ford and GM, two of the state's largest employers, are steadily losing market share. GM just announced that their 2005 results will be far lower than previously expected.

    Our state is reaping the results of heavy unionization. GM and Ford have such enormous unfunded pension and health care liabilities that there is a lot of doubt that they'll be able to pay the bills in the next few years. This article quotes the former CEO of American Airlines saying that if GM doesn't fix its pension and health care problem fast, "it cannot continue." What would happen to Michigan if there is a GM or Ford bankruptcy?

    Radical changes are needed for this state to begin to prosper again. Here are our radical recommendations:

  • Make Michigan a right to work state - end mandatory union membership in union shops. Free workers to negotiate their own wages and benefits. The UAWs of the world are so out of touch with reality that they are actually harming their members in the long term.
  • Cut taxes and state government dramatically. Don't just make Michigan even with other states in tax and regulation levels, make Michigan irresistible to businesses by slashing the red tape and cutting taxes deeply.
  • Lift the cap on charter schools. Let the private sector compete to improve education. Don't prop up dying monopoly school systems that are badly failing.

    Then, just maybe, we'll begin to see a turnaround in Michigan. Unfortunately, there is no easy, short-term fix. Just long term solutions to a structural problem in Michigan are what will work.
  • Wednesday, March 23, 2005

    Grand Rapids Schools’ Panic

    The last few weeks have seen a flurry of activity around the Grand Rapids Schools. Superintendent Bert Bleke, as well as members of the school board, have been screaming about funding. They claim that they need to cut another $18 million from next year's budget.

    But, lo and behold, they are actually pursuing some cost cutting measures!

    Apparently the school district is finally pursuing outsourcing non-educational services. They're looking at outsourcing 400 jobs, according to the Grand Rapids Press. They're even vowing to keep cuts away from the classroom (a novel idea).

    The board members are blabbering on and on, as though this is such a tough and horrible decision - one they've been forced into against their will. Do any of them realize that they are running a school district, not a jobs program? They should have been doing this stuff years ago.

    But, along came the Teachers' Union Cavalry. They showed up en masse on Monday evening at the school board's meeting. Even the executive director of the Michigan Education Association spoke. They're bringing out the big guns. One can smell the fear in the air.

    We'll see if this school board and superintendent have a spine and stick by their plans.

    Tuesday, February 1, 2005

    Big Government Republicans

    Michigan's Senate Majority Leader Ken Sikkema yesterday released a plan to help rejuvenate Michigan's economy. It appears to be another case of politicians and bureaucrats picking economic winners and losers. Apparently he thinks that a few folks in Lansing know how better to pick which economic sectors will do well and should receive special government favors.

    But, before we continue with why several of his plan's aspects are bad ideas, let's go over what the plan contains.

  • Creation of a seed capital fund. This fund, created by the issuance by the state government of a $50 million bond, would provide startup capital to companies. However, at the same time, the state government would get an ownership interest in the company that receives capital, purportedly to pay the state back for the seed money.
  • Creation of a tax credit for "angel investors" who incur losses when providing startup capital to "high tech" companies.
  • Creation of a pre-tax education saving account so that all Michiganders (not just post-high school students) could get a tax break on money spent to take classes at a community college or get other types of training.

    We question the effectiveness (and prudence) of all three of these proposals.

    First, for the state government to be in the business of venture capital is folly. Bureaucrats and politicians, no matter how well-intentioned, are not subject to market forces, making them inherently less-able to make good judgments on where to invest money. They will be confined by rules and regulations to determine where to spend our dollars, not the needs of the market.

    On top of that, the state will be taking an ownership interest in each of these companies that received seed capital. Do we really want the state government owning portions of businesses? That opens the door for political meddling in company operations. How many state-owned enterprises have been successes? We can't think of any.

    Second, Sikkema wants to create a special tax credit for private sector investors who lose money when investing in high tech startups. While this proposal may have its heart in the right place, it would be far more beneficial to the entire economy if taxes were simply decreased for everyone. Once again, this proposal is an example of politicians picking the winners and losers. That doesn't work.

    And third, Sikkema wants to create a special tax-free savings account for tuition for adults needing job training. This is probably the most acceptable of the three in the sense that it reduces taxation at its source. However, a general tax decrease would accomplish more for all Michiganders.

    In our opinion, Governor Granholm's Single Business Tax restructure is going to be far more effective at giving Michigan Business the tax relief it needs. Small business creates more jobs than big business, and this tax change is aimed at small business. To be more effective, the SBT should be further reduced than is proposed so that overall state government revenue is reduced.

    Michigan's per capita tax burden (as a percentage of income) is still higher than it was all through state history, with the exception of most of the 90's.

    Michigan's tax burden is still high when compared to the other states. Michigan ranks 13th on the list of the nation's highest tax burdens. That is not the way to attract new business.

    Our conclusion is a bit stunning. While a Democratic governor proposes a tax decrease, the Republican Legislative leaders propose more government! Roles have reversed. The Republicans are not the party of small government they claim to be.
  • Friday, January 28, 2005

    Detroit School Implosion

    In a nearly incomprehensible collapse of the Detroit School system, the Detroit Public Schools administration is projecting a loss of 40,000 students over the next three years. That's in addition to the 30,000 that have been lost since 1998. The DPS enrollment stands at 140,000 this year.

    The DPS 2005 budget has nearly a $200 million shortfall (that's more than the entire budget of the Grand Rapids Public Schools). DPS predicts that it will have to close 110 schools over the next couple of years.

    This is an unprecedented collapse of a school system. As we watch the death-throes of DPS, how far behind is Grand Rapids Public Schools?

    Superintendent Bert Bleke said he would not rule out bankruptcy when he unveils a plan to address budget problems for GRPS in March. This is despite the fact that GRPS was successful in raising taxes to pay for $160 million in buildings in 2004 and passing a county-wide tax increase, bringing in millions more for GRPS.

    What's wrong with these school systems? They are finally feeling the heat of educational competition. Detroit has been a heavy focus of charter school growth over the last decade, with acceleration in the last few years. Grand Rapids has a few schools, but it seems to have leveled off. Regardless, school districts have had to adjust their delivery, operations, and structure to counter the effect of charters.

    But the drain from urban school districts seems to continue. GRPS lost another 800 students this year, on top of the loss of hundreds of students a year for the last several years.

    Is enrollment a problem, or a symptom of the problem? Charter schools can't force anyone to enroll (as traditional public schools can). They open their doors and parents come running. Is the problem the existence of charter schools, as the education establishment wants you to believe, or is the problem the utter failure of public school systems? We believe it is the latter.

    The education world is now a marketplace, and the public school systems must deal with that fact. We're of the opinion that they are incapable of dealing with the situation because of the entrenched bureaucracy and the absolute unwillingness to embrace any change on the part of the teachers' union.

    DPS is almost dead. Is GRPS next? Will anyone mourn the death?

    Thursday, January 27, 2005

    State of the City Analysis

    Mayor George Heartwell gave his state of the city speech for 2005 on January 15th.

    First, let's go over last year's state of the city speeches. He gave three, but only two were available online.

    In his first 2004 SotC speech, Heartwell concentrated on education. His fluff-filled tome focused on adult literacy, city/schools operating partnerships, and education renewal zones, to divert more money to the schools. Oh, and he ended that speech with the old cliche, that it's for the children, "...all the children."

    His second speech, which we analyzed here, was a typical stump for more political power, centralization, and central planning. He wants more money spent on a wasteful mass transit system and strengthening of the Grand Valley Metro Council for more "regional planning." The one bright spot here is his stumping for tax-free renaissance zones. We wonder if he has any latent understanding of why tax-free zones work, but we're doubtful.

    This year's theme? Sustainability. Whatever that means. Well, we do know what it means, but folks like the mayor won't admit what it means. Essentially more government control of economic development. But we know that is a contradiction of terms.

    Heartwell starts out the speech by touching on the issue of violence in the inner city. He looks forward to a committee's recommendations to heal racism.

    Next, he looks back at last year's education speech and goes over accomplishments from the last year. He congratulates himself for raising taxes twice for Grand Rapids Public Schools. He discusses the success of an adult literacy program.

    Then he talks about the joint operational project between the city and GRPS. The strange part about this is that it isn't a joint operational project at all. All he can refer to is working with the schools to support more minority contractors and the sale of the West Middle School building to a developer. Huh? Last year he talked about saving money by using joint human resources, accounting, and groundskeeping departments. How have any of the above saved either the city or the schools money?

    Finally, he says that a joint program with the West Michigan Environmental Action Council and GRPS has helped environmental education. But, as we pointed out previously, this program, basically to collect trash around streams, costs the city about $564 per bag of trash collected. And we thought the schools and city were hurting for money.

    And then he laments the fact that the Education Renewal Zones concept hasn't progressed as much as he liked.

    Then we move on to the meat of the speech. What's he going to do for us this year?

    First, he goes over the usual doom and gloom predictions of how horrible the world will be if the government doesn't take a larger role in our lives. For example, he cites this example: "The United States, which presently uses 40% of all the world’s oil production and 23% of all coal production will be experiencing crisis levels in these resources."

    Didn't they make those types of dire predictions in the 70s? Yeah, and we're still here.

    So, we can see where this is going already.

    He then blabbers on (see if you can make it through his speech without falling asleep) about sustainability and all kinds of government partnerships to make peoples lives better, in a sustainable way. He goes on to lament the state of the economy in Michigan and how social equity (another buzz-word of the extreme left) must be kept in mind.

    The most fun (and laughs) comes from Heartwell's diatribe about electricity usage in Grand Rapids. He wants to reduce the City's dependence (he doesn't clarify if he means the City government, or the people in the city - he probably doesn't make that distinction in his own mind) on non-renewable resource power by 20% by 2008.

    His plan to do so? Wind power. And you thought cellphone towers were ugly.

    The mayor concludes with what he hopes the next generations will write about this one:

    In 2005 and 2006, this diverse group of people in Grand Rapids found ways to interconnect business with the environment – maximizing commerce and nature.
    This generation responded to the challenges of globalization by creating a city that led the state in productivity and returned the country to prosperity.

    This generation created a city where neighbors cared for neighbors and children were safe.

    This generation created schools that maximized each child’s potential and allowed us to respond to rich economic opportunities.

    Truly, this generation created a city that sustained life.

    Laudable goals. But government, bureaucrats, bureaucracy, high taxes, regulation, and central planning aren't the way to get us there. Anyone ever look at the history of Detroit?

    Wednesday, January 26, 2005

    Minimum Wage Lunacy

    This week the State's Democrats proposed increasing the state minimum wage from $5.15 an hour to $7.15 an hour over two years.

    We're dumbfounded. We can't understand what they are thinking. The Democrats in Michigan (with the help of the Republicans) are responsible for the over-protection of unions in this state. Those unions have created a business atmosphere where wages are so high that manufacturers are fleeing the state in droves. Artificially high wages have created unemployment.

    Michigan's unemployment rate stands at 7.3%. That ties us with Alaska for the highest unemployment rate in the nation. The failed economic policies of union favoritism are coming home to roost.

    But now, what do they propose? More of the same! Raising the minimum wage increases employers' costs. When employers are forced to pay more for labor, they will hire fewer people. This will further increase unemployment and decrease economic productivity.

    See: Unemployment: Causes and Cures.

    As an example: suppose you're a small business owner. You have four employees making $5.15 an hour. That's about $164 a day in labor cost (plus the expense of payroll taxes). If the minimum wage goes up to $7.15 an hour, that's $228 in labor cost a day. What is a small business owner to do? That's a 40% increase in labor costs. His choice is to either raise prices (probably close to that 40%, which most business owners know is suicide) or to fire one or two people. If he fires one person, his costs go down by about $57 a day, reducing the total to $171. That's a lot easier to recover in price increases. Plus, a little more productivity from those three remaining employees will probably cover the loss of one.

    What just happened? The increased minimum wage accomplished two things:

    1) it increased unemployment
    2) it increased prices

    Particularly hard-hit are black and latino minorities, which already have higher unemployment rates. So what the Democrats propose to do disproportionately harms the very people they claim to want to help most.

    We are forced to conclude that Democrats' behavior is motivated by one of the following:

    1) Complete ignorance of economics, or
    2) A desire to further harm the economy of Michigan, or
    3) A desire to look like the party of the poor people.

    We believe it's probably a combination of 1 and 3. However, their economic ignorance (or ideological bankruptcy) causes the opposite of the desired effect. Is Michigan consigned to a perpetual state of economic funk?

    See also: Michigan Wage Hike Threatens Already Fragile Economy.

    Tuesday, January 25, 2005

    City Budget Poll

    We'd like to make sure everyone who reads this fills out the Grand Rapids city budget poll online. The city leaders claim that they will not raise taxes (though they did several times in 2004) to fill the budget hole. Therefore, they are asking citizens to fill out a poll to tell them which city services are the most vital.

    What the city commission doesn't seem to be doing a serious job of is asking themselves what a city government should be doing, versus what they are doing.

    What are the basic responsibilities of a municipal government? In our opinion, the city should limit itself to these major things:

    1) Police and Fire
    2) Infrastructure (roads, water, sewer)

    However, our city fathers have taken it upon themselves to be social engineers, attempting to centrally control growth, poverty, education, etc. These are things that are best left to the private sector. Continuing to spend money on these things (while increasing the city's tax burden) only drives out middle class and businesses. If they truly want to make this a business- and job- friendly city, they'll concentrate on doing a few things well rather than doing everything they can poorly.

    It's time to take this budget problem and turn it into an opportunity to improve services, scale back bureaucracy and regulation, and improve city life for everyone by raising the water so all boats float higher.

    Take the city's poll here.